COVID-19 SPECIAL: Economic Affairs

The economic consequences of working from home

People, companies and governments will need to adapt to both positive and negative effects

Working from home (WFH) is the new normal and, to a large extent, it is here to stay.

The Ministry of Manpower has urged that WFH should be the default option after the circuit breaker has ended. It may last at least until the Covid-19 pandemic is defeated and maybe even beyond.

Despite its many disadvantages, many companies have found that WFH is not only feasible but also enables them to operate efficiently and at lower cost.

For some, more WFH could become a permanent arrangement.

But a prolonged period of WFH will have profound economic and social consequences.

WFH AND INEQUALITY

One of them will be inequality.

There is a straight line from more WFH to higher inequality. This is because while many high-income professionals can work from home, many others who are lower on the income scale cannot.

These would include workers in customer-facing services like in restaurants and large parts of retail, production workers, construction, maintenance and some transport workers, people providing office administrative support and rank-and-file workers in the hospitality, leisure, airline and large-scale entertainment industries.

Many of the establishments where such workers are employed will face acute challenges.

Some may innovate and automate (especially in manufacturing) and succeed in remaining viable, but many will not be able to survive.

Business closures will have ripple effects because industries are interconnected.


ST ILLUSTRATION: CEL GULAPA

The closure of hundreds of small restaurants, for example, will affect food suppliers, kitchen equipment makers, interior designers and suppliers of crockery and cutlery, among others. Similar ripple effects will occur in other industries.

And so, layoffs will rise.

As Manpower Minister Josephine Teo said last week, job losses have already started. In March, there were seven vacancies for every 10 unemployed people. That ratio will get worse, with more retrenchments likely after the wage subsidies under the Jobs Support Scheme taper off.

Unfortunately, many of those laid off (though not all) will be relatively low-wage workers, which will translate into higher inequality.

NEW JOBS

Many of the jobs lost will not come back because a lot of business closures will be permanent.

However, new jobs will be created in other areas.

Besides expanded hiring in the public sector and traineeships under government-sponsored schemes, there will be new jobs in areas such as e-commerce, healthcare, supermarkets, supply chain management, trucking and warehousing.

Some new companies will also start, as always happens during recessions. So it will be possible for some laid-off or furloughed workers to be redeployed.

 
 

We are seeing this already: Taxi drivers are doubling up as couriers and restaurant workers are providing delivery services. Airline stewards and stewardesses are working in the healthcare sector, supermarkets or as social distancing ambassadors.

Most of these will be temporary roles, but they will fill key gaps in the workplace and meet vital needs for many workers.

As the recession deepens, even some large companies in sectors that remain viable will see their revenues decline.

They will opt for pay cuts in the first instance (which has already affected at least 150,000 workers since mid-March) but also layoffs as the last resort, after their wage subsidies end. To further reduce fixed costs, they will increasingly rely on contract workers, whose numbers will increase.

Creating platforms for such on-demand "gig workers" to be matched with prospective employers will need to be an important part of any job creation strategy in the WFH era.

Many workers will end up working for multiple employers, in some cases at the same time, and on "tasks" rather than jobs.

But one consequence of the rise of on-demand work will be a rising proportion of workers with unstable incomes and insecure employment.

This in turn will call for more durable safety nets, including more permanent income support which will have to be part of the policy conversation going forward.

More income instability will also change the dynamics of the housing market. There will be less demand for mortgages because people, especially the growing ranks of gig workers, will be less confident of taking on long-term financial commitments.

There will be higher demand for low-cost rental housing, including through co-living arrangements, in which people share apartments - a common phenomenon in high-cost housing markets such as Hong Kong. This trend will last at least as long as the pandemic.

WORK FROM ANYWHERE

On the bright side, WFH will also mean "work from anywhere".

In many areas, workers, especially white-collar professionals in the service sector, will have more freedom on where to locate themselves.

Already, in some countries such as the United States, Britain and Australia, there is rising demand for suburban and rural living, where housing is also more affordable, in the wake of the Covid-19 outbreak.

Some of this might be temporary, but some will endure as more companies come to accept that their business can be sustained with a remote workforce.

Interestingly, increasing numbers of job postings are indicating the desired location for the job as "anywhere". See, for instance, remoteleaf.com/whoishiring, a website that picks remote job postings from company career pages, LinkedIn, Reddit, Facebook and Hacker News Hiring.

While the "anywhere" jobs are mostly for information technology positions such as software developers and website reliability engineers, they also extend to graphic designers, marketing and technical writers, and fraud prevention experts.

The range of jobs that can be done from anywhere could well expand as the acceptance of remote work increases.

This raises the possibility that some workers could choose to work at least some of the time from a tropical or temperate paradise of their choice, so long as it has good connectivity.

There will be no commuting and housing will be cheaper.

 

It will also mean that more Singapore workers can, if they have the skills, apply for jobs around the world while remaining in Singapore. Local companies can more easily hire from around the world as well. Some professionals from overseas may also choose to locate in Singapore.

WFH also means that more women - who have traditionally spent more time at home, sometimes withdrawing from work to take care of domestic needs - can now enter or re-enter the workforce.

In sum, for both job applicants and recruiters, WFH will suddenly make the labour market larger, but also more competitive.

WFH will benefit some companies more than others.

Research led by Bond Capital's Ms Mary Meeker - famous for her annual Internet Trends report - suggests that for companies with far-flung operations, WFH will enable workers outside headquarters to feel more included as more intra-company communication moves online.

It also best suits companies with cloud-based functions where workers can take their computing devices and work from anywhere.

Companies with a more easily discoverable online presence, which have a broad social media footprint and that can distribute their products or services in limited-contact ways, will also benefit the most.

But WFH will also create new challenges for all companies, such as measuring individual performance - especially for those workers whose deliverables are less tangible; redesigning their organisations to be more effective in a WFH environment; ensuring online security in the face of rising numbers of remote workers; and adapting their recruitment methods.

REPURPOSING COMMERCIAL REAL ESTATE

At least as long as the pandemic lasts, WFH will have negative consequences for commercial real estate, both office and retail.

Companies will need less office space, more retail activity will move online and restaurants that focus on serving lunchtime office workers, as in the Central Business District, as well as office canteens, will be especially hard hit.

Offices will need to be remodelled. There will be new regulations or guidelines on this.

The United States Centres for Disease Control and Prevention has already come out with recommendations, including the barring of seating in common areas, a minimum amount of spacing between desks, the installation of plastic shields, workers being required to wear masks and changes in ventilation systems.

In Singapore, property industry experts suggest that some office real estate may need to be redeveloped into hotels or residential spaces because even if demand for office space returns in future, it will not be what it was before the pandemic, as many WFH arrangements will have become entrenched.

 
 

Big malls will also need to repurpose.

The rise of e-commerce already forced many of them to change their tenant mix away from retail to include more food and beverage as well as "experiential" elements. They will need to pivot again as demand for dine-in F&B declines.

They will need to cater more to omni-channel retail, with takeout-friendly redesigns such as kerbside pickup facilities, including for non-food items.

Both in office buildings and malls, carparks too would need to be redeveloped as demand for parking declines - which was happening anyway with the rise of ride-hailing services and the expansion of the MRT, but will now accelerate.

Elsewhere, some outdoor carparks have been converted to drive-in movie theatres which are making a comeback as revenues at traditional theatres have all but dried up because of social distancing. Such theatres would also need to be repurposed.

WORK-LIFE (IM)BALANCE

With more WFH, work-life balance has shifted in favour of "life".

Some like it, as it allows for more flexible working hours and more time with family. Some enterprising households are also providing home-cooking and home-baking services as well as home crafts to sell online.

But for many others, the shift has gone too far. Peoples' social lives, which often centred around the workplace, have been disrupted.

 
 
 

Around the world, there have been increases in loneliness and social isolation, especially among the elderly. The Government is mindful of this and has set up a 24/7 hotline to help people cope with anxiety, stress and depression.

Anybody needing help can call 1800-202-6868.

There is also evidence of other negative effects arising from WFH and sheltering in place.

For instance, the Singapore police have reported a 22 per cent increase in reports filed for offences related to family violence during the first month of the circuit breaker, compared with the previous month.

Much of the violence may have been directed towards women, which is the case in other countries.

The World Health Organisation has put out an FAQ on dealing with violence against women during the Covid-19 pandemic. 

By upending traditional working arrangements and peoples' home lives, WFH will thus have both positive and negative economic and social effects.

People will need to adapt and imaginative government policies will be needed to help society transition to the new normal.

 
A version of this article appeared in the print edition of The Straits Times on June 03, 2020, with the headline 'The economic consequences of working from home'. Print Edition | Subscribe